Hynix Semiconductor will face fast-track bankruptcy proceedings unless it accepts a break-up plan being proposed by its creditors, South Korea's financial regulator has warned.

Hynix's future has been in doubt since its board last week rejected a $3bn offer from Micron, the biggest US maker of memory chips, to take a stake in the Korean firm.

Micron broke off talks with the Korean firm, saying it could see no way to reach agreement.

Hynix owes more than $5bn to its creditor banks, which want the company carved up into profitable and non-profitable businesses and sold off piecemeal.

Last-ditch warning

Financial regulator Lee Keun Young has warned Hynix's board it has no choice but to accept the break-up plan. Hynix's creditors are due to meet on Wednesday.

If the Hynix board rejects it, "there would be no alternative but to follow the procedures for a pre-packaged bankruptcy " under corporate restructuring laws passed in September last year, he told the Yonhap news agency.

Hynix would then become the first company to put in receivership under the fast-track bankruptcy law.

Liquidation threat

"Creditors' basis position is to sell [assets of Hynix]. There has been no change in that position," said Lee Kang-won, chief executive of Korea Exchange Bank after talks with Micron broke down.

For creditors whose Hynix loans have been underwritten "it is better to liquidate Hynix than to inject new funds", a government source told news agency Reuters.

"There would be no big problem in liquidating Hynix."

Hynix salvation?

Micron's withdrawal ended an acquisition saga going back months, when a full merger between the firms was reported to have been discussed.

Even the divisional buyout rejected by Hynix directors would have left Micron as the world's biggest maker of memory chips, with a 40% share of the global market.

Samsung, with a 28% market share, is currently the top-ranking memory chip maker.

While Hynix creditors approved a deal with Micron, directors are hoping for salvation in the form of recovering chip prices.

"We are confident that with the upturn in the semiconductor industry and new developments in our technology, our business competitiveness has improved," the board said on Tuesday.

"Therefore, we have concluded that it is possible for Hynix to successfully exist as an independent entity."